Market volatility is forcing U.S. equity traders to change their execution strategies, according to a new report from the TABB Group.

This includes the way traders use capital, transact trades in blocks, embrace algorithms and crossing networks and view their relationships with brokers. As a result, broker relationships are being re-evaluated, TABB said. Sell-side brokers' sales traders have increased their share of order flow for the first time in years, capturing 44% of total buy-side flow, up from 37% in 2007. But the report questions whether in the midst of extreme volatility, although the equity sales trader has enjoyed a comeback, it might be only a temporary one. TABB Group interviewed 61 head traders at traditional long-only institutional asset management firms representing an aggregate $12.9 trillion in assets under management (AuM), beginning in August 2008, prior to Lehman Brothers' downfall, finishing in September as the U.S. government announced the takeover of Fannie Mae and Freddie Mac. Confirming that buy-side traders fear moving large blocks in highly volatile markets, 51% said their block executions have decreased year-over-year in 2008, Laurie Berke, TABB Group senior consultant and the study's author, said in a release.

"The percentage of volume executed on crossing networks has dropped for the first time since TABB began tracking it in 2004, in line with the overall drop in block-sized transactions."

Focusing further on the heightened effect of volatility on Wall Street, Berke added that nearly 90% of the study's participants increased or are maintaining the amount of their order flow executed using algorithms in 2008 over 2007. As bulge-bracket firms undergo restructuring, the availability of risk capital has become scarce and, according to Berke, a majority of the buy-side firms say that the cost of capital has risen while the number of brokers willing to commit capital has dropped.